The Real Reasons Behind San Francisco’s Fast Growing Income Gap

In a recent interview with Time San Francisco mayor Ed Lee was asked a series of questions relating to the ever widening income gap among the populous of a city once known for art, music and activism; it is now becoming known for a median rent of over $4000/month for a 2 bedroom apartment and fleets of Google buses carting around wealthy young techies. His answers are what we have come to expect from a member of the political class, no matter how well intentioned they might be. In other words, he addresses symptoms as if they are the cause.

San Francisco has been hailed by some as a trend setter for a higher minimum wage, but the long term gains are questionable. While increased wealth and prosperity for individuals and communities is a wonderful goal of any civilized society, the first question is to ask whether mandated wages produce that in the long term. Getting a raise is great, but if the gap between the rich and poor is rapidly accelerating despite wage controls, then clearly mandated wages are not having the effect desired. Not to mention the ethical problem of making it illegal for anyone to work for less than the mandated wage.

One could argue, however, that with an unemployment rate of just 4.8%, a booming tech market and higher wages for low skilled workers are, in fact, having the desired effect. But while many of these lower skilled workers have jobs in the city, most of them can’t actually live in the city, and in some cases are being muscled out by landlords eager to jack up the rent. The housing issue is a symptom as well. While the city has worked to maintain its classic Victorian homes they have impeded development of cheaper housing, and have caused dramatic pricing spikes in rent and housing prices.

The rich are moving in, the poor are being pushed out, and the political class is naturally unable, or unwilling, to attack the core issues.

Should we be going after the successful entrepreneurs, though? It is arguable that their immense financial success is in turn creating jobs, which is what we expect from a thriving market. But then again it is doing nothing to the exaggerated gap in income. Again, though, these are symptoms of larger core issues.

Many would argue that without wage controls businesses would pay as little as possible and actually increase poverty. There is a kernel of truth in this. But if we place it into the context of WHY businesses in the current paradigm would do this then we see the solution right in front of our eyes. Due to a combination of IP law, patents, eminent domain and central banking, companies have more opportunity for runaway profits resulting from monopolized money and barriers that keep other entrepreneurs from entering the market. Due to this they not only gain runaway profits, but they would, if they could, pay people as little as possible in order to maximize those profits. For many it might feel like they have no choice but to become wage slaves, or work illegally, and so naturally go to work for those that have been able, via the State, to dominate the market.

So what can we do?

The black market and the open source movement are great places to start as a means of shifting the market into favoring more than just the politically connected, and we have seen the big companies change in response to this, so there is hope. Cryptocurrency is also an exciting and dynamic market for alternate currencies which can become available to billions of people around the globe.

In the end, many will blame the free market for the income gap and discontent in San Francisco, but upon further examination we can see that not only is the market NOT free, but that in spite of the political class creating social and economic distortions which stifle further innovation and competition, the market is still producing better products and services and lower prices than it has before, and that is a hopeful thing. At this point it is beneficial to us to use the production of the market to resist the current paradigm and, in turn, make it better, and freer.

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